Unpacking Minnesota’s “new” common law standards for antenuptial agreements

Bulletproof. Ironclad. Impenetrable. Popular culture treats prenups as something approaching the armor of Achilles—protecting the bearer from all the vagaries of life and marital misfortune. To borrow a more modern metaphor, prenups are the stalwart insurance policy protecting the powerful and wealthy against even their most heedless romantic adventures.

But the popular narrative of the bulletproof prenup has never truly squared with legal reality. In fact, the breaches in the prenuptial armor have been steadily expanding for 30 years, reaching a high-water mark this past May in the Minnesota Supreme Court’s decision in Kremer v. Kremer. Far from providing certain protection, Minnesota prenuptial agreements may now be more uncertain than ever—subject to ill-defined and fluctuating common law standards that should leave spouses-to-be and their advisors uneasy.

For attorneys drafting, litigating, or advising clients on prenuptial agreements, Kremer marks a new era of legal uncertainty. It not only vanquishes the myth of the impermeable prenup but leaves even the most well-drafted agreements open to attack.

The path to Kremer v. Kremer (1979-2018)

Whether terminated by death or divorce, no marriage lasts forever. And when a marriage ends, Minnesota law provides a default set of rules to determine spouses’ various financial rights and obligations—either in the form of intestacy or marriage dissolution statutes. A prenuptial agreement (referred to as an antenuptial agreement in Minnesota)allows future spouses to opt out of these default laws and predetermine the division of assets, spousal maintenance, and other aspects of the legal process (such as which state’s law will govern) in the event of death or divorce.

Though Minnesota’s common law has long recognized the right of marital partners to contract away certain spousal rights (particularly upon one spouse’s death),1 statutory authority for such agreements was not codified until 1979. Under the statute—which has received little substantive modification since enactment—future spouses can contract away their rights to non-marital property so long as a) there is a full and fair disclosure of the earnings and property of each party, and (b) the parties have had an opportunity to consult with legal counsel of their own choice.”2 Provided these procedural hurdles are met, statute suggests all agreements within the scope of the statute will be “valid and enforceable.”

Despite the law’s apparent simplicity, its restriction to merely non-marital property proved fertile ground for uncertainty. Rather than validating all agreements, the statute covers only those that address rights to a limited category of property, remaining silent as to rights to marital property, spousal maintenance, and attorneys’ fees.3 As a result, future spouses were left to wonder: Precisely how much work does the statute do?

The Supreme Court first addressed this question in 1989 in McKee-Johnson v. Johnson,4 determining the legal standard that should control agreements dividing marital property. Rather than invaliding such agreements as outside the bounds of the statute, the Supreme Court relied on statutory savings language.5 This language, the Court reasoned, permitted antenuptial agreements to determine matters other than non-marital property, so long as the agreements were enforceable without the statute—that is, under Minnesota’s common law.

The McKee-Johnson Court then proceeded to outline a new three-part framework for common law enforceability, which required the court to determine whether the agreement was procedurally fair (“equitably and fairly made”), substantively fair when created, and still substantively fair at the time of enforcement. So long as an antenuptial agreement survived on all three fronts, it could be enforced even as to matters beyond non-marital property.

McKee-Johnson devoted significant attention to the question of substantive fairness, a review that “guards against misrepresentation, overreaching and unconscionability.”6 In consequence, however, the decision devotes relatively little analysis to procedural fairness—that is, how antenuptial agreements are entered into. In place of a more searching analysis, the McKee-Johnson Court assumed standards for procedural fairness to be the same under both statute and common law.

For nearly 20 years, McKee-Johnson remained the final word on the subject, until a little-noticed estate dispute reached the Supreme Court in In re Estate of Kinney.7 In Kinney, importantly, the antenuptial agreement at issue was executed in 1969, and thus clearly not governed by statute. Revisiting Minnesota’s common law, the Supreme Court acknowledged McKee-Johnson’s three-fold fairness review, but shifted away from identifying procedural fairness simply with the statutory requirements of full and fair disclosure and the opportunity to consult with counsel.

(1) whether there was fair and full disclosure of the parties’ assets;

(2) whether the agreement was supported by adequate consideration;

(3) whether both parties had knowledge of the material particulars of the agreement and of how those provisions impacted the parties’ rights in the absence of the agreement; and

(4) whether the agreement was procured by an abuse of fiduciary relations, undue influence, or duress.8

Reviewing these factors, the Court upheld an agreement first presented to the bride-to-be on the morning of her wedding, with no opportunity to consult with counsel, and despite testimony that she “didn’t understand all of [the agreement,]” and felt “under duress because the agreement was presented to her on the day of her wedding.”9 Significantly, though, future husband “never insisted [wife] ‘must’ sign the agreement and… never said ‘sign this or I’m not marrying you.’”

At first, Kinney seemed only an interesting historical footnote—a well-considered and scholarly opinion, but ultimately irrelevant as the number of pre-1979 prenups dwindled with the passage of time.

But McKee-Johnson and Kinney read together posed far more significant questions. What standards of procedural fairness governed post-1979 agreements—common law or statute? If an agreement encompassed both marital and non-marital property, which standard prevailed? And precisely how does one distinguish the standards of substantive and procedural fairness that looked increasingly intertwined?

Kremer v. Kremer

After more than a decade percolating beneath the surface, these questions returned to Minnesota’s high Court in 2018 in Kremer v. Kremer.

Robbie Kremer became engaged to Michelle in August 2000, and the couple planned a destination wedding in the Cayman Islands for March 2001.10 Though Robbie had told Michelle in general terms that he wanted a prenup, nothing specific had been discussed. Instead, Robbie contacted an attorney to produce a draft agreement, which was prepared over six separate contacts. Three days before Robbie and Michelle were to leave for their wedding, Robbie signed the agreement and presented it to Michelle, making it clear that if Michelle did not sign the agreement, the wedding was off.11

Under Robbie’s proposed agreement, both parties surrendered their rights to “alimony or maintenance.”12 In addition, in the event of divorce, each retained his or her own property and “any assets acquired during the marriage… [would be] divided between the parties in proportion to the monetary consideration provided by each.”13 In essence, Robbie would retain his million-dollar farming enterprise, started prior to the marriage, and Michelle (then employed at a gas station) would retain only what she brought into the marriage or accumulated on her own afterward.

After receiving the agreement, Michelle attempted to meet with her prior divorce attorney. When that attorney was not available, Michelle met two days later with a different attorney whom she did not know. After having the agreement explained to her, and with family already en route to the ceremony, Michelle signed the agreement. She and Robbie left for the Cayman Islands the following day.

Nine years later, the parties divorced and Michelle successfully moved to set aside the agreement. In granting Michelle’s request, the district court applied the statutory standards of procedural fairness and found Michelle lacked an “adequate opportunity” to meet with legal counsel, and that Robbie “used the wedding deadline to create an atmosphere of pressure” to force Michelle to sign the agreement. As a result, Michelle received $750,000 in marital property, $168,000 in attorney’s fees, and permanent spousal maintenance.

Robbie appealed and the Minnesota Court of Appeals affirmed, albeit on wholly different grounds. Instead of applying the statute, the court applied Kinney’s four-part common law standard, reasoning that because Robbie’s and Michelle’s agreement allocated marital property as well as non-marital property, it was governed by the common law. However, even applying this alternative standard, the court of appeals still invalidated the agreement based on Robbie’s “unfair influence” and pressure, which led Michelle to execute the agreement.

The Supreme Court accepted review to reconcile the apparent conflict between portions of McKee-Johnson and Kinney. After reviewing the 30-year history already discussed, the Court addressed precisely the question left unanswered in Kinney: What standard governs post-1979 agreements addressing marital property?14 And it concluded: both.

Justice Lillehaug, writing for five members of the Court, concluded that Minn. Stat. §519.11 functions as a statutory “safe harbor,” providing a simplified procedural fairness test for the provisions of an antenuptial agreement governing non-marital property.15 Put differently, the statute replaces the four-factor common law test with two elements (full and fair disclosure and access to counsel). If these statutory requirements are satisfied, the agreement is procedurally fair, but only as to those portions of an agreement governing non-marital property.16 If these elements are not met, the agreement should then be analyzed under the common law test for procedural fairness enunciated in Kinney.17 Likewise, agreements dividing marital property, or addressing spousal maintenance, attorneys’ fees, or other extra-statutory matters, will always be analyzed under the four-factor Kinney test.18

Applying this framework to the Kremers’ agreement, the Court observed that the agreement failed to distinguish between “non-marital” and “marital” property, instead simply referring to “property” generally.19 As a result, Robbie could not avail himself of section 519.11’s safe harbor, and needed to meet the common law standard. That he could not do.20 Examining the circumstances under which the agreement was reached, the Court relied upon the absence of consideration and undue influence to invalidate the agreement.

As to consideration, the Court observed, “because antenuptial agreements typically involve parties in a confidential relationship, capable of exploitation,” consideration must not merely be extant, but “adequate.”21 Adequacy, in turn, appears to turn largely (or perhaps entirely) on the provisions made for the financially disadvantaged spouse.22 Here, the Kremer agreement’s “terms [were] patently one-sided” because “Robbie came into the relationship with significant assets which increased in value” during the marriage.23 Conversely, “Michelle came into the marriage with very little,” and “[i]f the Agreement were enforced, she would leave the marriage with very little.”24 Especially considering Michelle’s contributions to Robbie’s farm operation, maintenance of the household, and care for the couple’s child, “the consideration Michelle received for executing this Agreement was not anywhere near adequate.”25

As to duress, the Supreme Court cited the district court’s finding that “there was an overreaching because Robbie intentionally created a situation where Michelle was pressured/coerced into signing the Agreement.”26 The Court also noted that Michelle “was completely in the dark for more than a month while Robbie received legal advice and prepared the Agreement”27 and concluded that “Michelle’s free will was overcome by Robbie’s threat to call off the wedding and the limited amount of time Michelle had to consider the Agreement, consult with an attorney, and decide whether to sign it or not.”28 In contrast with the circumstances in Kinney, Robbie’s pressure and use of ultimatum were sufficient to invalidate the one-sided agreement.

A step-by-step post-Kremer guide

To the more cynical, the Court’s holding in Kremer suggests two practical lessons. First, never, never let the client threaten to call off the wedding if the prenup isn’t signed. Second, be the proverbial fattened pig rather than the slaughtered hog; don’t be greedy.

But for those committed to a more nuanced understanding of the current state of Minnesota law, the Kremer decision creates a complex procedural web for analyzing the enforceability of antenuptial agreements. In place of the statute’s two-prong test, or common law’s four-factor analysis, courts must now conduct at least four distinct inquiries, as follows.

1. Is the agreement limited to non-marital property, or does it include marital property, spousal maintenance, attorneys’ fees, or other matters outside the statue?

First, the Court must determine if the statutory safe harbor is available (even in part). As discussed at length in Kremer, the answer hinges entirely on whether the agreement governs marital or non-marital property.

At first blush, the inquiry seems uncomplicated. Does the agreement purport to divide only property acquired before the marriage (or through gift or inheritance) or does it control property acquired during the marriage as well? But the marital/non-marital distinction is not so simple.

To be sure, non-marital property includes property acquired before the marriage, as well as gifts or inheritances made solely to one spouse.29 But non-marital property also includes “all property… excluded by a valid antenuptial agreement.” In short, the definition of non-marital property is circular: The statute only provides a safe harbor for agreements governing non-marital property, but it permits such agreements to define non-marital property. Justice Anderson’s dissent in Kremer makes a related observation.

Practitioners wishing to extend the statute’s safe harbor as far as possible would thus be well advised to broadly define “non-marital property” within their agreement, and then use this definition to govern any later division on death or divorce. Consistently defining and dividing non-marital property throughout an agreement remedies one of the core deficiencies the Court identified in the Kremer agreement—which divided only “property” and not “non-marital property,” however defined.

What Kremer leaves unanswered is whether any limits exist on the parties’ ability to craft their own definition of “non-marital property.” Surely considerations of substantive fairness impose some limitation. But what of including a party’s future earnings within an expansive definition of “non-marital property” and then prohibiting either party’s “non-marital property” from being used to pay spousal maintenance or attorneys’ fees? Could parties write the common law’s standards of procedural fairness completely out of their agreement with nothing more than clever wordplay?

2. If the agreement is limited to non-marital property, does it satisfy the statutory requirements?

So long as an agreement limits itself to dividing “non-marital property,” however defined, it need only meet statutory standards of “full and fair disclosure” and access to counsel. Though full and fair disclosure does not demand any particular form of disclosure, a clear written disclosure along with supporting financial documents remains advisable.30

Correspondingly, access to counsel does not require actual representation, but knowledge of the right to counsel and an opportunity to seek such counsel.31 As with other aspects of procedural fairness, parties should avoid applying undue pressure or insinuating that without an agreement the wedding will be called off. Such threats can undermine the right to access counsel required by statute.32

If the above two conditions are satisfied, the agreement is procedurally valid—at least as to those provisions governing non-marital property. However, the agreement must still pass muster as substantively fair both at the time of execution and enforcement.33

3. If the agreement includes matters other than non-marital property or fails to meet the statutory test:

As an alternative to step 2, the agreement must be analyzed under Kinney’s common law standard if it fails to conform with the statute or addresses matters beyond non-marital property. But rather than simply reverting to Kinney’s four-part analysis, two preliminary inquiries are required first.

a. Are the parties in a confidential relationship?

Though not expressly addressed in Kremer, Kinney’s common law standard assumed the parties stand in a “confidential relationship” to one another—that is, a relationship of “faith and confidence” such that the parties are not dealing with each other at arm’s-length.34 The law normally presumes a confidential relationship between partners engaged to be married, and one would expect such a relationship to exist in most cases. But where the marriage is one of convenience, a more businesslike quid pro quo rather than a genuine romance, the presumption can be rebutted.35

Notably, the entire Kinney standard presumes the existence of a confidential relationship between the parties. Where no such relationship exists, the standard may be inapplicable, leaving room for the possibility of a far less searching review.36

b. Is the consideration for the agreement adequate?

Once a confidential relationship is established (as will often be the case), the court must next inquire into the adequacy of consideration. Typically, a determination of the sufficiency of consideration is a question of law, which a court may resolve through summary judgment or other pretrial motions.37

At this phase in the analysis, consideration’s dual role becomes apparent. Not only is the adequacy of consideration one of Kinney’s four factors for determining validity, but the sufficiency of consideration also determines the allocation of the burden of proof. Agreements supported by adequate consideration must be proven invalid by the party challenging the agreement.38 If consideration is inadequate, however, the burden of proof shifts to the agreement’s proponent.39

The confused role of consideration may be one of the great unanswered questions in Kremer. On its face, it would seem that “inadequate” consideration can at once invalidate an agreement. But language from Kinney suggests that inadequate consideration may not be fatal, but instead merely shifts the burden of proof to the agreement’s proponent.

Reconciling this apparent contradiction requires an appreciation that the Kinney “test” is not so much a list of elements to be proven, but a balancing test of four factors: a strong showing on one may remedy deficiencies in others. Thus, we first inquire into the adequacy of consideration to determine which party carries the burden of proof. If consideration falls short, the agreement may still be salvaged, but only by a strong showing of the other three Kinney factors by the party arguing for validity.

c. Does the agreement pass Kinney’s 4-part test?

Only after determining i) that the common law applies, ii) that the parties are in a confidential relationship, and iii) which party bears the burden of proof, can the court proceed to apply the four-factor Kinney test, which presents a mixed question of law and fact.40 As discussed above, Kinney’s test is essentially a balancing exercise of the following four considerations:

1) whether there was fair and full disclosure of the parties’ assets;

(2) whether the agreement was supported by adequate consideration;

(3) whether both parties had knowledge of the material particulars of the agreement and of how those provisions impacted the parties’ rights in the absence of the agreement; and

(4) whether the agreement was procured by an abuse of fiduciary relations, undue influence, or duress.41

Kinney and Kremer read together provide some guidance as to factors (2), (3), and (4), as the Kremer agreement fell on inadequate consideration and undue influence, while Kinney survived all four factors despite a less than ideal set of facts.

4. Is the agreement substantively fair at both execution and enforcement?

Finally, whether the agreement is governed under common law or statute, all antenuptial agreements must be substantively fair both when they are executed and when they are enforced.42 A review for substantive fairness requires the Court to “assess fairness, reasonableness, or conscionability of the terms of the agreement,”43 and may be expected to significantly overlap with an assessment of the adequacy of consideration. Correspondingly, the Court must examine whether any changes in the parties’ lives (the birth of children, a disability, etc.) have made enforcement of the agreement “oppressive and unconscionable.”44

Unfortunately, Minnesota’s courts have provided little guidance for conducting such analyses, observing that “each case hinges on specific facts” which preclude “precise rules or guidelines.” Even as courts have cautioned that Minnesota’s dissolution or intestacy statutes should not serve as a benchmark in the fairness analysis, the pull of such an objective standard seems almost unavoidable.45

Conclusion

The Minnesota Supreme Court’s decision in Kremer provides important clarity surrounding the shifting, common law standard governing antenuptial agreements, but uncertainty in this area of the law remains significant. Though such agreements may continue to be favored both under statute and common law, bulletproof they are not.

22Hill v. Hill, 356 N.W.2d 49, 53 (Minn. Ct. App. 1984) (holding that a property settlement of $20,000 was “clearly inadequate” to support a waiver of all a wife’s rights upon dissolution or her husband’s death where the wife entered the marriage with only nominal property and husband’s net worth was approximately $750,000); Slingerland v. Slingerland, 115 Minn. 270, 132 N.W. 326 (1911) (rejecting a $5,000 settlement to wife from a $225,000 estate as inadequate consideration); Serbus Estate v. Serbus, 324 N.W.2d 381 (Minn. 1982) (rejecting $4,000 and a life estate in the home as inadequate consideration where wife would otherwise have been entitled to $300,000).

23Kremer, 912 N.W.2d at 628.

24Id.

25Id.

26Id. (internal quotation marks omitted).

27Id.

28Id.

29 Minn. Stat. §518.003, subd. 3b(e).

30Pollock-Halvarson v. McGuire, 576 N.W.2d 451, 456 (Minn. Ct. App. 1998) (“No case has held that the term ‘full’ means literally every item of tangible or intangible property that a party has an ownership interest in. Such an interpretation would impose on contracting parties an intolerable burden and would foster the defeasibility of the contract for the most trivial omission.”)

31McKee-Johnson v. Johnson, 444 N.W.2d 259 (Minn. 1989)

32Rudbeck v. Rudbeck, 365 N.W.2d 330 (Minn. Ct. App. 1985).

33Kremer, 912 N.W.2d at 622 n.3. Though the Court observes that this issue was undisputed, it’s notable that the statute makes no reference to any substantive fairness analysis and, on its face, appears to assume validity purely based on disclosure and access to counsel.